3 Dec:  US$ under increasing downside pressure. Stocks flat. Services/Composite PMIs in focus. Australian Trade Balance coming up.

3 Dec: US$ under increasing downside pressure. Stocks flat. Services/Composite PMIs in focus. Australian Trade Balance coming up.

Stocks are flat on Wednesday, while the US$ remains under downside pressure at the end of a session in which sentiment was divided between optimism stemming from a potential Covid fiscal package and further positive headlines on vaccine breakthroughs on the one hand, and a bleak private jobs report  from the US, which comes ahead of Friday’s official jobs report, on the other. Bond yields continued to see the positives, ending the day strongly higher, with the US10Y now back at 0.95%, after having traded to as low as 0.65% in early November, and down to 0.36% at the height of the pandemic.

In the FX markets, the Chf soared as it played catch-up with the Euro, which itself has regained 1.2100 against the US$, while Sterling plummeted due to growing concerns that there will be no breakthrough in the Brexit talks, with a “no-deal” Brexit now seen as a real possibility. Sterling fell sharply from its 1.3440 high to a low of 1.3287 in a volatile session that sees it end the day back at 1.3360. Elsewhere, other points of interest were seen in the Aud$, which has regained 0.7400, underpinned by a strong iron ore price, and the Kiwi, which continues its grind higher, today reaching 0.7083, last seen in April 2018.

The metals continue to rally, with Gold +0.85% and Silver +0.25% but the real action was in Iron Ore which has put on 3%, now at $136pt, which should underpin the Aud$ and stock market today.

In terms of the data, the US ADP employment grew 307k in November, well below expectation of 500k and signals the chance of a lower than expected NFP reading and official unemployment rate (exp 480K/Headline;6.8%) on Friday.

Oil squeezed up to 45.85 before settling at 45.20 (+1.8%) ahead of the OPEC+ Meeting, which was scheduled to take place on Tuesday but has been  postponed until later today (Thursday), in order to give negotiators more time to find a breakthrough as they attempt to  agree whether to walk back from the biggest-ever output cuts made earlier this year. We shall see.

From Europe, the Eurozone unemployment rate dropped to 8.4% in October, down from 8.5%, but matched expectations, with 13.825m unemployed, down -86k for the month. Eurozone PPI came in at 0.4% mm, -2.0% yy in October, versus the expectation of 0.1% mm, -2.3% yy.

Thursday will look to the Global Services/Composite PMIs (Australia, China, Japan, EU, UK, US) for guidance. Other points of interest will include, in Asia, the NZ Building Permits and the Australian Trade Balance (exp +$5.8bio), Home Loans data and Construction PMI. Later on, the EU October Retail Sales will be released (exp +0.8%mm, +2.7%yy), while the US will focus on the ISM Services PMI for November (exp 56; prior 56.6) and the weekly jobless claims (Initial 775K/Continuing 5.91mio). Have a good day.

Economic data highlights will include:

Thur: Australian AIG Performance of Construction Index, Global Services/Composite PMIs (Australia, China, Japan, EU, UK, US) , NZ Building Permits, Commodity Prices , Australian Trade Balance, Home Loans/Investment Lending for Homes, EU Retail Sales, US Weekly Jobless Claims, ISM Services/Prices Paid,

Market moves, in brief:

FX: DXY 91.13 (-0.20%)

Bonds: US10Y; 0.954% (+2.86%), German 10Y; -0.520% (+0.86%), UK 10Y; 0.358% (+1.35%), Australian 10Y; 0.995% (+6.75%), NZ 10Y; 0.915% (+6.82 %), China 10Y; 3.313% (+0.72%)

Stock Indices: DJI; +0.12%, S+P; +0.14%, NASDAQ; -0.13%, EUStoxx50; -0.11%, FTSE100; +1.23%, Shanghai Composite; -0.07%, ASX200SPI: -0.14%

Metals: Gold $1829 oz (+0.80%), Silver $24.05 oz (+0.25%), Copper $3.4900 lb (+0.16%), Iron Ore $136.00 per tonne (NYMEX) (+3%),

Oil: WTI $45.20 pb (+1.88%)

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Trend Table: December 3, 2020                                                    

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In the trend table below, when looking at the charts for a particular FX pair, index or commodity, we are we searching for 2 or 3 consecutive boxes of the same colour which might indicate a trend – and a possible trading opportunity. Consecutive (1 & 4 hour, 4 hour/daily, daily/weekly) green boxes indicate a possible short/medium/long term uptrend; red, a possible downtrend, while blue signifies a neutral bias (range trade possibility).  The boxes on the trend table merely replicate the look of the charts for the specific time-frame in MT4/5. Assets with a mixture of colours are pretty much ignored as choppy conditions seem likely to prevail.

For instance, if we see consecutive green boxes in the  1 hour and 4 hour time-frames for the FX pair “EURUSD”, that would signify the chance of a move higher in that pair over the next 24 hours. If the dailies were also green that would add to the bullish conviction from a slightly longer term perspective, and if the weeklies are also green then it would give added credence to the longer term bullish view, albeit that it might take longer for the trend to play out, so patience will almost certainly be required.   The opposite would be true of red boxes, which could signify downward momentum. The strength of any possible trend depends on the time-frame, with the longer term (daily, weekly charts) obviously having a greater overall weighting than the short-term charts.

In the near term though, the 1 and 4 hour charts are what are likely to combine to indicate the possibility of a trading idea for the next few, possibly up to 24, hours.

Note that a longer term bullish view (green daily/weekly boxes) does not discount the possibility of near term dips (i.e. Red 1 & 4 hour boxes), which may indicate near term weakness and suggesting that we should be looking to buy dips for a longer term rally – and vice versa if the near term boxes are green and the longer term; red.

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Outlook:                        

The US$ seems to be under increasing downside pressure now that the support in the DXY hat 92.00 has well and truly given way after falling to a new 2 ½ year low of 91.08. The Euro looks very firm indeed although the short term charts may need to pull back a bit allowing the momentum indicators to unwind, but buying dips seems to be the overall plan. The Euro is running into Fibo resistance at these levels so allow for a pullback towards 1.2000, which should now be decent support. Similarly, the Aud looks set to break higher although strong resistance remain intact at current levels, but I do suspect we are heading for 0.7500/25, while the Kiwi seems about to take on 0.7100+. Buying dips in either/both is preferred.  I would stay away from Sterling – too hard because of Brexit – although it may be worth selling it against the Euro if you think we are headed for a “no-deal” outcome – which looks increasingly likely unless they can pull a rabbit out of the hat. With US$Chf now at a new 5 year low after having broken below 0.9000, the charts seem to have little/no support until 0.8800.

Stocks look neutral and I suspect choppy sideways consolidation is in store. It maybe that we crawl to new highs in the US indices but I think progress will be slow. For now, buying dips with a suitable SL seems the most constructive outcome. With regard to the ASX SPI, I think today may be one of consolidation between 0.6550/0.6640, underpinned for the most part by the strong rise overnight in the Iron Ore Price.

Commodities look set to ratchet higher on the back of a weakening US$. Buying dips now in Gold, Silver and Oil seems to be the plan, although remember there is a virtual OPEC+ Meeting due today.

EURUSDUSDJPYGBPUSDUSDCHFAUDUSDNZDUSD
1 HourBearish DivergenceTurning LowerTurning Higher?Possible Basing FormationUpNeutral
4 HourUp – OverboughtNeutral – Turning Higher?Turning NeutralTurning LowerTurning NeutralTurning Neutral
1 DayTurning HigherTurning NeutralNeutral – Turning Higher?Neutral – Turning Lower?Neutral – Turning Higher?Turning Higher
1 WeekTurning NeutralTurning NeutralTurning Higher?Turning Higher?Neutral – Turning Higher?Turning Higher
DXYS+PASX200GOLDSILVEROIL_WTI
1 HourBullish DivergenceTurning NeutralNeutralTurning NeutralTurning Lower?Turning Higher
4 HourNeutral – Turning Lower?Turning NeutralTurning NeutralTurning NeutralTurning Higher?Turning Neutral
1 DayTurning Lower?Turning NeutralPossible Topping FormationPossible Basing FormationTurning NeutralTurning Higher
1 WeekPossible Basing FormationUp – OverboughtUpDownDownNeutral
EURJPYEURGBPGBPAUDAUDJPYEURAUDAUDNZD
1 HourOverbought – Turning Lower?Possible Topping FormationPossible Basing FormationNeutral – Turning Higher?Turning Lower?Up
4 HourUp – OverboughtTurning HigherTurning NeutralNeutral – Turning Higher?Possible Topping FormationBullish Divergence
1 DayTurning Higher?Neutral – Turning Higher?NeutralTurning NeutralTurning NeutralPossible Basing Formation
1 WeekTurning NeutralTurning NeutralTurning NeutralTurning NeutralTurning NeutralTurning Lower

DXY: Monthly

EurUsd; Daily

AudUsd; Weekly

Gold; Daily

S+P; Daily

ASX SPI; 4 Hour

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